Quiz Sales Comparison Approach Ch 5-6 Flashcards
“A lump-sum payment or series of payments to the lender that reduces the interest payments of the borrower” is the definition of a(n)
Buydown
“A mortgage that has priority over all other mortgage liens on a property” is a ___________ mortgage.
First
“A pledge of a described property interest as collateral or security for the repayment of a loan under certain terms and conditions” is the definition of a
Mortgage
“Liens placed on a property after a previous lien has been made and recorded; a lien made subordinate to another by agreement” are called __________ liens.
Junior
“Mortgages that are neither insured nor guaranteed by an agency of the government, although they may be privately insured” is the definition of ______________ mortgages.
Conventional
A “point” is ___% of _______________.
1, loan amount
A cash equivalency adjustment may be required when the loan is:
Seller financed at a below-market interest rate
A home sold five months ago for $232,000. Since then, property values in that location have appreciated by 1% per month. (Use simple interest.) You want to use it as a sale comp in an appraisal and the location of the sale comp is superior to the location of your subject property and deserves a 10% negative adjustment because of the superior location. What is its adjusted sale price?
- First step is to apply the market conditions (time) adjustment . . . $232,000 X 1.05 = $243,600. Second step is to apply the location adjustment to the sale price adjusted for market conditions . . . $243,600 X .90 = $219,240.
A mortgage that is not fully amortized at maturity and requires a lump sum payment of the outstanding balance at the end is called a ____________ mortgage.
Balloon
A mortgage with equal payments for each period over the length of the loan is called a __________ loan.
Fixed rate
A property has a first mortgage of $120,000, a second mortgage of $30,000, and a third mortgage of $15,000. It is foreclosed and sold for $145,000. The holder of the third mortgage gets $________ and the holder of the second mortgage receives $ _________.
0, $25,000
A property has a first mortgage of $125,000, a second mortgage of $30,000, and a third mortgage of $10,000. It is foreclosed and sold for $140,000. In this situation, the holder of the third mortgage gets $________ and the holder of the second mortgage receives $ _________.
0, $15,000
A property sold for $256,000 and sold again 11 months later for $289,000. What was its percent of increase?
12.9%. $289,000 ÷ $256,000 = 1.129 or 12.9%
A property sold in November for $312,500. It sold again 9 months later for $354,800. What was its average monthly rate of appreciation?
1.5%. $354,800 - $312,500 = $42,300. $42,300 ÷ 312,500 = .135. .135 ÷ 9 = 0.015 or 1.5%
A property sold in October for $412,500. It sold again 9 months later for $471,900. What was its average (not compounded) monthly rate of appreciation?
The question is asking for the “average” monthly not the “compounded” rate of increase. The average rate is found by finding the total change, dividing that by the original price which will give the total percentage change. That is divided by the number of months to determine the average monthly rate of change. This is different than the monthly compounded rate, which will be slightly lower, because each month the beginning balance for that month included the increase from the previous month, so the rate of change can be lower to achieve the same result. $471.900 ÷ $412,500 = 1.144 or 14.4%. 14.4% ÷ 9 = 1.6%
A purchaser bought a property for $215,000, put 15% down and borrowed the rest at 6.75% interest for 25 years. The lender charged 2.5 points at the closing. How much was paid for the points?
4568.75. $215,000 X .15 = $32,250. $215,000 - $32,250 = $182,750 mortgage. $182,750 X .025 = $4,578.75.
A type of mortgage designed for retirees and other fixed-income homeowners who owe little or nothing on their homes is called a _________________ mortgage.
Reverse annuity
An ARM is
An adjustable rate mortgage
Another name for a land contract is a(n)
Installment sale contract
(seller receives payment in installments, title is transferred when paid in full, also called contract for deed)
Cash equivalency adjustments are typically made when
A transaction involved non-market financing
Changes in a market cycle may be ____________.
cyclical, one-time-only
Seasonal, exponential
(Exponential - continuously increasing at a rapid rate)
Fannie Mae expects that the appraiser should provide which date or dates for each comparable sale?
Sales contract and the closing date
Houses on the north side of town sold for a median price of $186,420 twelve months ago and that the median price of those homes for the current month is $214,975. What is the percent of increase?
15.3%. $214, 975 ÷ $186,420 = 1.153 or 15.3%.
If a sale is not arm’s-length, the appraiser
May either discard it or use it with adjustments
In the sales comparison approach, which of these factors should be adjusted for before the others?
Market conditions
Long-term market cycles are caused by:
National or international conditions
Market condition adjustments are also commonly known as
Time adjustments
Mortgage assumptions are xxx when xxx are xxx.
Attractive when rates are rising
Mortgages that are either insured by the FHA or guaranteed by the VA:
Tend to offer favorable terms
Mortgages with payments that start out low and gradually increase are called _____________ loans.
Graduated payment
The definition of arm’s length is a transaction between ___________ parties under no _______.
Unrelated, duress
The definition of arm’s-length is a transaction between ___________ parties acting in their own _______ interests.
Unrelated, best
The life cycle of a market area typically includes the stages of growth, _____________, decline and _______________.
stability, revitalization
The primary participants in the secondary mortgage market are
Fannie Mae, Freddie Mac, and Ginnie Mae
The real estate market tends to be an xx responder to xx-term economic cycles
An early responder to short-term economic cycles
The term ARM means
Adjustable rate mortgage
Two-bedroom condos in the city sold for a median price of $180,440 nine months ago and that the median price of those homes for the current month is $206,390. What is the indicated average increase per month?
1.6%. $206,390 ÷ $180,440 = 1.144; that equals 114.4% of the original median price. Take out the 100% and it leave 14.4% as the increase. 14.4% ÷ 9 months = 1.6% per month.
What happens when the borrower defaults on a VA mortgage and causes a loss to the originating lender?
The VA reimburses the lender for the loss
Which of the following are LIKELY to be factors that can help you analyze changes in local market conditions?
Foreclosure rates in the area, Amount of new construction available for sale, Instances of seller financing
Which of the following is a guaranteed loan?
VA
Which of the following is an insured loan?
FHA
Which of the following would be classified as a long term trend for market cycles?
Population trends, Income levels, Migration patterns
Which of the following would be classified as a short term trends for market cycles?
Availability of financing, Interest rates, Loan to value ratios
Which of these do originate mortgage loans?
Savings and loan, Commercial bank, Credit union
Which would typically be a cause of duress that could result in a transaction that would not be considered arm’s length?
Sale to a relative, Sale with an unknowledgeable buyer or seller, Sale prior to an impending foreclosure
With a land contract, title passes when the seller delivers the deed _________.
When the total price is paid
You are in a very hot real estate market with values going up monthly by 2%, and lenders are taking months to process transactions, creating extended closing times. As an appraiser, you should:
Adjust the comparables from their contract date of sale to the effective date of the appraisal
You live in a summer resort town. Real estate prices typically drop 15% during autumn and winter. A house sold for $200,000 in July. What would it sell for in December?
- $200,000 X .85 = $170,000.
You live in a summer resort town. Real estate prices typically drop 15% during autumn and winter. A house sold for $250,000 in July. What would it sell for in December?
- With your 12C enter: 250,000 ENTER 85% Answer is $212,500.
You live in a winter resort town. Real estate prices typically rise 20% during autumn and winter. A house sold for $200,000 in July. What would it sell for in January?
- With your 12C enter: 200,000 ENTER 120% Answer is $240,000.
Your research of a comparable sale reveals that the purchase price was $200,000, but the purchaser realized the property needed extensive repairs to the mechanical systems. The estimated cost to cure the problems was $15,000 but the actual costs turned out to be $20,000. What should you do?
Adjust the property sale price by $15,000
(since the purchase price was adjusted based on the estimate!)
Your subject is located in an area where property values have been declining consistently at 0.5% a month for the past ten months. You have located a comparable that is practically identical to your subject. It sold 8 months ago for $200,000. How much should you adjust the price?
minus 8000
Your subject is located in an area where property values have been rising consistently at 1.5% a month for the past twelve months. You have located a comparable that is practically identical to your subject. It sold seven months ago for $200,000. How much should you adjust the price?
- 7 X 0.015 = 0.105. 0.105 X $200,000 = $21,000.
What are the 4 phases of Market Areas?
Growth
Stability
Decline
Revitalization
